The Italian lower house passed the latest budget package on Saturday, aimed to rescue Italy from its financial crisis, and clearing the way off Prime Minister Silvio Berlusconi. The PM resigned as promised after the budget was approved, generating crowds of jubilating Italians that celebrated in the streets his departure. Mario Monti accepted on Sunday the offer from Italian President Napolitano to form a new government.

The result has given the Euro a modest jolt by breaking 1.3800 in early Asia, which continues the relief rally held through Friday. “The news out of Italy from the weekend is welcome, but well anticipated by the markets. The calming of the Italian debt market and the subsequent gains in the EUR and risk assets suggests the relatively smooth transition was priced into the market” comments John Noonan, Head of IFR Markets in Sydney,

Meanwhile, according to Geoffrey Yu, currency strategist at UBS, Italy's challenges remain severe and investors will be closely watching bond yields to see if they can fall to more affordable levels. If Italy can stabilize, the focus may fall back on the ECB and the EFSF, two institutions whose policies and capacity to help remain under scrutiny.”

The Italian bonds spread yields jumped earlier this week to 7.6%, the same level that triggered bailouts from the ECB and the IMF, for Portugal, Ireland and Greece. The euro zone contagion fears that menace the currency over the beginning of this 2011, finally exploded over the past few weeks and already two PM had resigned over the crisis, being the other one, George Papandreou from Greece, who has been replaced by Lucas Papademos, a doctor in economics.

If this is what it takes to save the euro zone, is something yet to be seen over the upcoming years, as the crisis is only starting. However, investors had adopted a more positive outlook, while attention this week will remain focused both in Italy and Greece, waiting for actionable steps that help mitigate the crisis and the spiraling debt issues.